Compare personal loans for students
Being a student can be a costly experience, particularly for those living in cities with high living expenses, such as in a major Australia city like Sydney or Melbourne. Students who don't have the benefit of parents supporting them through their years of studying need sources of funding that are realistic in terms of repayments. Student personal loans can help with this, though they may not suit all.
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Student personal loans
Being a student can be a costly experience, particularly for those living in cities with high living expenses, such as Sydney or Melbourne. Students who don't have the benefit of parents supporting them through their years of studying need sources of funding that are realistic in terms of repayments.
What are student loans?
Student loans are a type of personal loan designed to help students pay for courses, university tuition and fees, as well as living expenses. They are a common feature of higher education in many parts of the world.
For those starting out at university, growing sufficient savings to fund your studies may feel nearly impossible. Even with a part-time job, this is not likely to give students a serious nest egg to fund their courses. For many young people – and mature students as well – a student loan from either a public or private source of finance is the only way to afford their education.
Taking out a student loan can be seen as an investment in your financial security over a number of years, as you're aiming to fund a course or degree that can improve your job opportunities over your career and earn more than you might otherwise have done.
Who can use a student loan?
Much like with all personal loans, student loan eligibility in Australia is up to the discretion of the lender you’ve chosen. This means that if you aren’t an Australian Permanent Resident, you’ll need to carefully examine the eligibility criteria of said lender to see if they provide financing for non-permanent residents, like international students.
There are a range of personal loan lenders who provide finances for students, and one of the best ways to choose the most competitive product to fund your education is to utilise comparison tools, such as RateCity’s student loan comparison table.
What are the features of a student loan?
|Secured loan||This allows you to put down an asset, such as a car or equity in a home, as security on your personal loan. This usually results in a lower interest rate as you’re seen as a less risky borrower, however if you fail to make your repayments, this security can be repossessed by the lender.|
|Unsecured loan||Does not involve putting down an asset as security, and therefore usually comes with a higher interest rate. This type of personal loan usually comes with more flexibility though.|
|Tranche funding||Some lenders can release your funds in portions throughout the length of your course.|
|Repayment schedule||Lenders allow you to choose your student personal loan repayment schedules, such as fortnightly or monthly, allowing for flexibility in your budget planning.|
|Loan term||The length of your loan repayments, usually between two and five years.|
What student loans can I get from the Australian government?
Student loans are one way to bridge the gap between what Centrelink is able to provide through assistant programs. According to StudyAssist, there are a range of government loans and subsidies in place, including:
- HECS-HELP - a loan scheme to help eligible Commonwealth-supported students to pay their student contribution amounts through a loan or upfront discounts.
- FEE-HELP - a loan to help eligible fee paying students to pay their tuition fees.
- SA-HELP - a loan that assists eligible students to pay for all or part of their student services and amenities fees.
- OS-HELP - a loan to help eligible Commonwealth supported students pay their overseas study expenses.
- VET Student Loans - a loan program that helps eligible students enrolled in certain higher-level vocational education and training courses at approved course providers to pay their tuition fees.
Loans from the government can be attractive in terms of good repayment conditions, but not everyone is necessarily eligible for these, and even those receiving a government loan may need to consider taking out a student loan from a private provider.
How do I get approved for a student loan?
Approval for a student personal loan in Australia could depend on individual finances and the lender’s eligibility criteria. One of the best things you can do is to try and improve how reliable lenders perceive you as a borrower, as well as to research and compare your student personal loan options before applying.
- Examine your credit history – if you have a bad credit history, your chance of approval for a student loan will be negatively impacted. If you have no credit history or a short credit history, lenders will take this into consideration for student loans, as most students are too young to have developed an excellent credit history.
- Pay off your debt – If you have existing debt from a credit card or another personal loan, lenders will see this when they examine your personal finances. Try to pay off your debt, or at least consistently meet your monthly repayment amounts to help improve your credit score.
- Regular income – having a regular income source, such as a full-time job, will show lenders that you have stability in your finances. While having a full-time job can be near-impossible for many students, lenders can take this into consideration, and look favourably on those with casual or part-time work.
- Compare student loan options with RateCity comparison tools, such as student loan comparison tables, to ensure you’re getting the most competitive personal loan for your financial needs.
- Carefully examine the eligibility criteria of the lender, particularly if you are an international student, to make sure you’re applying for a student loan you could be approved for.
Alternatively, you can consult a finance broker and let them organise the loan on your behalf. Most finance brokers won’t charge for the service; instead, they’ll earn a commission from the lender.
What are the pros and cons of student loans?
For many students, a student loan is essential to be able to manage finances during the period of study. Often with lower than average interest rates and favourable repayments terms, they can provide financial security while at university.
Further, for young students with non-existent credit history, lenders won’t necessarily reject your application. Instead, they may offer you a higher interest rate than someone with a great credit score.
If you take out a student loan and are able to defer your payments, this might seem like it’s helping your immediate financial situation. However, that interest is likely to be charged on the loan right from the start, and after a number of years that can add a lot of money to what you will have to repay.
- Able to afford an education
- Lower than average interest rates
- More understanding eligibility criteria
- Risk of falling into debt
- Deferring payments will lead to higher interest
Kate was one of RateCity's Personal Finance Commentators. She has been a journalist for more than a decade, most of which has been spent writing about money. Most recently, she was the Australian Financial Review's personal finance correspondent. She is passionate about personal finance and women's independence.
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Completing an online personal loan application can often take anywhere from 10 minutes to 1 hour. Depending on your lender, processing your personal loan application may take anywhere between 1 and 24 hours. If your personal loan application is approved, you may receive the money in your bank account the following business day, or, in some cases, the same day.
In the best-case scenario, an application for a bad credit personal loan can be made within minutes and then be approved within 24 hours. However, if a lender needs more information or needs more time to verify the provided documents, the application process may take longer.
It is possible for students with no available history of borrowing or managing money to get a personal loan, though it may be more difficult as well as expensive than for borrowers with a good credit history.
Having no credit history means having no credit score. While many lenders may consider having no credit score to be better than having a bad credit score, they may still consider it riskier to lend to an unknown borrower and may charge higher interest rates or fees than to borrowers with good credit scores.
The worse your credit history, the harder you will find it to consolidate your debts, because lenders will be less willing to lend you money and will charge you higher interest rates.
However, people with bad credit histories can make debt consolidation work by following this three-step process:
- First, find a lender willing to give you a bad credit personal loan. This process will be simplified if you go through a finance broker or use a comparison website like RateCity.
- Second, make sure the interest repayments on your new loan are less than the repayments on the loans being replaced.
- Third, instead of spending those savings, use them to pay off the new loan.
Lenders aren’t allowed to charge interest on loans of $2,000 and under. Instead, they make their money by charging a one-off establishment fee of up to 20 per cent and a monthly account-keeping fee of up to four per cent. Lenders might also ask you to pay a government fee.
For loans between $2,001 and $5,000, lenders can make their money in only two ways: a one-off fee of $400 and annual interest rates of up to 48 per cent.
For loans of $5,001 and above, or for loans that have terms longer than two years, lenders can charge annual interest rates of up to 48 per cent.
Those fee caps don’t apply to loans offered by authorised deposit-taking institutions such as banks, building societies or credit unions, although such institutions are highly unlikely to charge interest rates of anywhere near 48 per cent.
Some lenders are able to approve applications with little documentation and within minutes. However, there is a catch. People who take out easy/instant loans generally pay higher interest rates and are restricted to lower amounts than people who follow a traditional borrowing process.
While some personal loans can be secured by the value of an asset, such as a car or equity in a property, student personal loans are often unsecured, which typically have higher interest rates.
Some lenders also offer guarantor personal loans to students. These loans have lower interest rates, as a guarantor (usually a relative of the borrower with good credit) will fully or partially guarantee the loan, taking on the financial responsibility if the borrower defaults.
Few, if any, lenders would be willing to give guaranteed approval for a bad credit personal loan. Borrowers with bad credit histories can have more complicated financial circumstances than other borrowers, so lenders will want time to study your application.
It’s all about risk. When someone applies for a personal loan, the lender evaluates how likely that borrower would be to repay the money. Lenders are more willing to give personal loans to borrowers with good credit than bad credit because there’s a higher likelihood that the personal loan will be repaid.
So a borrower with good credit is more likely to have a loan approved and to be approved faster, while a borrower with bad credit is less likely to have a loan approved and, if they are approved, may be approved slower.
Borrowers who take out bad credit personal loans don’t just pay higher interest rates than on regular personal loans, they also get loaned less money. Each lender has its own policies and loan limits, but you’ll find it hard to get approved for a bad credit personal loan above $50,000.
The Australian personal loans market contains dozens of lenders offering several hundred different products. Personal loans are available through a range of institutions, including:
- The big four banks (ANZ, Commonwealth Bank, NAB and Westpac)
- Smaller banks (such as Bank of Queensland, Bendigo Bank and MyState)
- Mutual banks (such as Heritage Bank, Greater Bank and Newcastle Permanent)
- Credit unions (such as People’s Choice Credit Union, BCU and Community First Credit Union)
- Non-bank lenders (such as Pepper Money, Liberty and RACV)
- Peer-to-peer marketplaces (such as Harmoney, SocietyOne and RateSetter)
There are three main ways to access personal loans. You can go through a comparison website, such as RateCity. You can use a finance broker. Or you can directly contact the lender.